Savings rate rise does not indicate deregulation: RBI

It was announced by the Deputy Governor of the Central Bank, Subir Gokarn, that the hike in the saving bank deposit rate brought in by the Reserve Bank of India does not indicate deregulation.

Post the release of the annual policy statement by RBI, a press conference was held where Gokarn past this statement.

Today during the first half of the day, 50 basis points hike was announced by RBI in its key rates. The savings bank deposit rate has also been increased to 4% that is a 50 basis points hike by RBI.

Earlier the savings deposit rates were the most reasonable funding source for the banks and now with this new move by RBI, the net interest margins of the banks will reduce. “Cost of funds would go up by 5-15 basis points across the industry," K V S Manian, group head - consumer banking, Kotak Mahindra Bank told Moneycontrol.com.

“Most banks will try to pass on the higher cost of funds to the borrowers. Our ALCO (Asset Liability Committee) will meet tomorrow to evaluate the impact of the RBI credit policy. Lending rates could possibly rise. However, being a bank with smaller base, we may not be impacted much," he said.